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04/07/2011

Compression Headaches? 5 Things You Can Do Now to Avoid Them

This is the third installment in a series on salary compression. I am asking some of our colleagues to help you build an early warning system!

Want to know the steps to take now that will help you avoid future compression headaches?

Meet Shelley Pryor, Managing Principal of Pryor Group LLC. With more than thirty years of solving compression problems (among many other pay and performance issues), she's eager to help you avoid them, especially since things can get real sticky for your managers -- and for everyone in your Compensation department.

Shelley and I have worked together for a wonderfully long time, so I don't really have to finish my sentences. She knows just what to focus on that would be preventive, practical and timely:

First, do no harm. If your company has been through several years of belt-tightening, now is the time to do a catch-up competitive analysis. This will help you know specifically where your company stands vs. the market for different job groups -- and what the effects of years of low-to-no increases have been. If you can't do a complete competitive analysis right now, select a sample of core benchmarks that you can price. This will give you a solid picture of the current situation and your company's most pressing pay problems.

Ask around. Find out what your recruiters are running into. Are they feeling like they frequently have to increase their initial salary offerings to snag the talent that you need? It may not be an immediate problem for your company, but prevention involves early intervention. Get a feel for today's lay of the land. When there are jobs that recruiters are having trouble filling, does it have to do with a tight candidate pool or the attractiveness of your job offers? Check with managers, too. Especially in the departments that have the high impact jobs. Do they report that job candidates are eager and open-minded? Or are candidates being described as skeptical and standoffish? After the sluggishness of the last few years, managers will be eager for your support.

Do the math. Equip yourself with a realistic assessment of the dollars and cents involved. Once you've checked around, determine whether compression issues (current or looming) are likely to be by department, discipline or job group (supervisors, for example). Of these, are some groups or jobs worse off than others? Are any of these "mission critical" to the company's success? Are they considered highly paid positions (and so more expensive to resolve)?

Spend wisely. Look at your total increase budget. Even if it's just average, or downright small, consider how to apply it to best effect. Equal is not always equitable or effective. Consider your job groups in priority order. It may help you in a competitive sense to apply the budget differentially so that departments/job groups most in need get a higher percentage than others. Once you've identified the departmental budgets, develop your increase guidelines with compression in mind (e.g., give managers increase guidelines that help them move people to their proper position in range). Employees with better experience andperformance belong higher in the range than others, regardless of tenure or seniority.

Check your work. We're talking about compensation, not benefits, so there are no regulations requiring you to give the same increase budgets to all of your divisions, departments or groups. BUT, be fair. Lawsuits happen when pay programs aren't administered consistently. Once the pay budgets from managers come back, check the effects of the proposed increases on your population -- are there undesired effects? Before moving ahead, be sure there are no unintended consequences on protected classes (age, sex, ethnic group, etc.). And confirm that your fixes in one department or job category aren't going to cause compression problems for other job titles/departments next year.

Looking for these earlier installments on salary compression? Here are the links:

Margaret O'Hanlon is founder and principal of re:Think Consulting. She has decades of experience teaming up with clients to ensure great Human Resource ideas deliver valuable business results. Margaret brings deep expertise in total rewards communication to the dialog at the Café; before founding re:Think Consulting, she was a Principal in Total Rewards Communications with Towers Perrin. Margaret earned her M.S. and Ed.S. in Instructional Technology at Indiana University. Creative writing is one of her outside passions, along with Masters Swimming.